Tesla Inc.’s shares fell as the global chip shortage cast doubt on its sales targets for 2021, damping investor enthusiasm after the electric-vehicle maker had its first US$1 billion quarter of net income.

Even with second-quarter profit and sales exceeding estimates, it was Chief Executive Officer Elon Musk’s cautionary hints from Monday evening’s call with investors that held sway with investors Tuesday. He highlighted the unpredictabiltiy of chip supplies and the hurdles he expects in ramping production at two new factories in Austin and Berlin later this year. 

Tesla fell as much as 4.2 per cent, the biggest intraday decline since June 3, and was trading down 3.2 per cent at 12:10 p.m. in Jin New York.

“While we’re making cars at full speed, the global chip shortage situation remains quite serious,” Musk said. “For the rest of this year, our growth rate will be determined by the slowest part in our supply chain.”

Musk said Tesla has had factory shutdowns due to parts shortages even as its engineers rewrote software to adapt to whatever chips they could find. The company confirmed a forecast for 50 per cent annual growth in deliveries over multiple years and reiterated that this may be one of the years it expands by more than that.

“Guidance for this year and comments about next continue to be vague,” Cowen analyst Jeffrey Osborne wrote in a note Monday after the earnings release. “The company continues to target over 50 per cent delivery growth; however, consensus assumes over 70 per cent growth.”

Tesla sold just under 500,000 vehicles in 2020, and a record 201,250 cars in the second quarter. Profit for the three months ended June 30 more than tripled to US$1.45 a share on an adjusted basis, beating the 97-cent average of analysts’ estimates and marking the eighth straight quarter of profit.


Manufacturing agony

Musk also revisited one of his familiar themes on the earnings call: the challenges of manufacturing vehicles at scale.

“It’s hard to sort of explain to people who have not been through the agony of a manufacturing ramp,” he said. “It is so hard to do production.”

Musk may have been setting expectations as Tesla approaches two ambitious manufacturing pushes later this year. The automaker said it’s on track to start output of its Model Y crossover in two new plants -- the one in Austin, and another in Germany -- by year-end.

Tesla pushed back the start date for its Semi truck, first unveiled in 2017, yet again to next year. Production of its highly anticipated Cybertruck pickup will follow the Model Y in Austin, but Tesla didn’t provide further details.

“I don’t think anyone is surprised that the Semi is delayed and that the focus is on Model Y and Cybertruck,” analyst Gene Munster of Loup Ventures said in a phone interview.


Battery timeline

Musk also declined to give a firm timeline for when Tesla’s new, larger 4680 battery cells, which it’s trying to make in-house, will be ready. The automaker plans to use them in both the Semi truck and the Model Y built in Austin, but has a backup plan to use 2170 cells if it can’t be achieved in time, Musk indicated on the call.

“There is a tremendous amount of innovation that we’re packing into that 4680 cell,” he said. “I think it will be great, but it’s difficult to say when the last of the technical challenges will be solved.”

While Musk telegraphed uncertainty ahead, Tesla achieved rich profit margins in the second quarter despite grappling with chip shortages and port congestion.

Rising sales of Model Y crossovers and Model 3 sedans delivered a fourfold increase in operating income, even as Tesla slogged through a costly ramp up of new Model S and X vehicles. The company widened its margins from core auto operations to 25.8 per cent, from 22 per cent in the prior quarter and 18.7 per cent a year earlier.

“It puts them down the path of being the best-in-class automotive company from a margin perspective,” said Ben Kallo, a Robert W. Baird analyst. “I don’t think anyone expected this big of a beat.”

Tesla’s auto gross margin excluding regulatory credit sales has increased almost 10 percentage points to the highest since the company introduced the Model 3, Chief Financial Officer Zachary Kirkhorn said on the conference call with analysts. That was possible because Tesla has lowered the cost of making cars by more than it has cut prices, he said.

While Tesla is still by far the world’s biggest automaker by market value, its shares have declined about 9.9 per cent this year even as the S&P 500 has reached new highs. More established peers including General Motors Co. and Ford Motor Co. have rallied as they have laid out plans to more aggressively push into the nascent EV market.

More competition from rival EVs comes against a backdrop of supply-chain challenges from a global semiconductor shortage and higher commodity prices.

Tesla’s second-quarter revenue almost doubled to US$11.96 billion last quarter, beating analysts’ estimates of US$11.36 billion. Revenue from the sale of regulatory credits -- used by other automakers to offset greenhouse gas emissions -- totaled US$354 million, down from US$518 million in the first three months of the year.